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Where to Put Your Money During a Recession

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It's normal to worry about where to put your money during a recession. A recession is a period of economic decline, and it can wreak havoc on investments. With so much uncertainty, people may not be sure whether it's a good idea to keep their money in the stock market, a savings or money market account, or a certificate of deposit (CD).

All of these options can be solid choices. The best place to put your money during a recession depends on your specific circumstances. If you're wondering where to put money during a recession, keep reading. We'll take a look at the pros and cons of each option.

Where to put money during a recession

Savings accounts, money market accounts, and CDs are all ways to keep your money at your local bank. Alternatively, you could invest in the stock market with a broker. Let's go over each over these options.

Save it in a savings account

Savings accounts are safe places to store your money if you believe you'll need to access it quickly. That's important in a recession: You may need support from your savings to help pay bills.

Compared to other options, savings accounts have few restrictions on withdrawals. Keep in mind you're normally limited to six free withdrawals per month under federal law (according to Regulation D).

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Regulation D and COVID-19

The Federal Reserve Board waived this during the COVID-19 pandemic, however. So right now, if you have money in a savings account, you can take it out as often as needed.

All savings accounts earn interest. The amount of interest depends on which account you choose -- so make sure to shop around before settling on one. The best savings accounts offer high APYs.

Note: Traditional savings accounts offered by brick-and-mortar banks usually have much lower APYs than online savings accounts. For example, compare the two savings accounts below. One is online-only, while the other is at a brick-and-mortar bank.

Rates as of Dec. 9, 2022
Offer
 
 
Account
Rating
Rating image, 4.00 out of 5 stars.
Info Icon Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
4.00/5
Rating image, 4.25 out of 5 stars.
Info Icon Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
4.25/5
APY 3.00% 3.20%
Min. to earn APY $1 $100
Next Steps

However, any savings account's APY won't be as high as the returns of longer-term CDs or the stock market.

If you're looking for a high rate of return, a savings account isn't what you're looking for. But if you're wondering where to put your money during a recession for easy access, a savings account is your best option.

Pros

Cons

  • Low APYs at brick-and-mortar banks
  • Withdrawing funds usually requires transfers
  • APY can drop at any time

Invest in a money market account

Money market accounts are similar to savings accounts. They also share some checking account features. Because of this, it's easier to access money kept in a money market account. These features can include debit cards or check-writing capabilities. Money market accounts, like savings accounts, are limited to six free withdrawals per month in normal circumstances. (That's been waived during the pandemic.)

The best money market accounts offer a winning combination of high APYs and easy access to your money.

The downside to money market accounts is their minimum balance requirements. You may need a minimum amount to open the account and/or avoid monthly maintenance fees. That could be problematic during a recession, particularly if you have to drain your savings to cover an emergency expense.

Pros

  • Direct access to funds
  • High APYs
  • Open at any bank
  • FDIC-insured

Cons

  • High minimum balance requirements
  • APY can drop at any time

Here are a few examples of top money market accounts:

Rates as of Dec. 9, 2022

Ally Money Market Account

Member, FDIC
Rating image, 5.00 out of 5 stars.
Info Icon Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
5.00/5
Monthly Fee
$0
Min. Balance
$0
APY
3.00%
Min. To Earn APY
$1
  • FDIC insured
  • No monthly fee
  • N/A

Ally's banking approach carries over to its money market account with a high APY and a focus on cutting routine account fees to $0, including monthly maintenance. What's more, there are no minimum balance requirements.

Sallie Mae Money Market

Member, FDIC
Rating image, 5.00 out of 5 stars.
Info Icon Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
5.00/5
Monthly Fee
$0
Min. Balance
$0
APY
3.20%
Min. To Earn APY
$0
  • FDIC insured
  • Competitive APY
  • No minimum balance
  • No debit card

The Sallie Mae Money Market Account offers a pretty high APY, especially considering that it has no monthly fees or minimum balance requirements. It doesn't offer debit cards or ATM access at the moment, but you can manage your funds via electronic transfer or withdraw them directly from the account by writing a check.

Member, FDIC
Rating image, 4.50 out of 5 stars.
Info Icon Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best
= Excellent
= Good
= Fair
= Poor
4.50/5
Monthly Fee
$0
Min. Balance
$100
APY
1.55%
Min. To Earn APY
N/A
  • FDIC insured
  • Competitive APY
  • Minimum balance requirement
  • No check writing or debit card capabilities

The CIT Bank Money Market account offers one of best rates, plus a low minimum opening balance requirement of $100. It doesn't offer check-writing capabilities or a debit card like some of its competitors, but it does let you deposit checks and transfer funds using the bank's mobile app. If you're looking for a money market account that's low on fees and offers a higher rate than most high-yield savings accounts, the CIT Bank Money Market account could be a good fit for you.

Invest in CDs

A certificate of deposit (CD) is a special type of bank account that offers a high APY. However, to get that APY, you must agree not to withdraw your funds for a set period of time. The amount of time during which you don't withdraw your funds is called the CD term. These terms can be a few months or a few years. If you withdraw funds early, you'd normally pay a penalty. Some banks are enabling customers penalty-free access to CD funds if they're experiencing hardship due to COVID-19. Check with your bank to see if it allows this.

The best CD rates are higher than the best savings account APYs. Additionally, most CDs lock in your APY for the whole term. That's useful when APYs are falling (as they sometimes do during recessions). If you're wondering where to put your money during a recession to earn consistent interest, a CD is a stable option. When you invest in a CD before or near the start of a recession, you'll keep your higher rate regardless of nationally-falling rates. However, if rates start to rise, you could get stuck earning a lower rate than you'd get with a newer CD.

Pros

  • Lock in your APY while rates are falling
  • High APYs on longer CD terms
  • Open at any bank
  • FDIC-insured

Cons

  • Limited access to funds
  • APY locked in even when rates rise

If you're thinking of opening a CD, you can browse top CD rates below.

Invest in the stock market

You could make a lot more money by investing in the stock market than using any of the bank accounts listed above -- but there's no guarantee. The stock market can be volatile, especially during recessions. Those who are new to investing may not know what to invest in during a recession.

You're technically free to cash out your investments whenever you want. However, it's best to only put money in the stock market if you don't plan to use it anytime soon. You don't want to invest cash you might need at a moment's notice. If you're in a tight spot, you might have to sell it at a loss. You also need to keep an eye on your investment fees as these can eat into your profits.

Pros

  • Large returns possible
  • Variety of investment options
  • Cash out whenever you want

Cons

  • Risk of loss
  • Can be intimidating for beginners

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